MatfuII 1996 Reading List

Part II: Dynamic Optimization

IIES, Stockholm University
October, 1996


The main book for this part is Chiang and is recommended to buy for everyone. This book is very similar to Kamien and Schwartz which was used previous years and is acceptable as an alternative. Chiang contains a lot of examples which you should study on your own. Your are supposed to read also the chapters which we do not cover in class. We will also use the first chapter from Sargent which is a useful book at least for those who want to continue with macro and/or finance. You should also look at my lecture notes.

You have to order Chiang your self, for example from any of the internet bookshops. The Internet Bookshop charge £21.95 plus £3.50 in shipping and handling.

The article by Bentolila and Bertola is a good introduction to irreversible investments and an application of stochastic dynamic programming. Harrison is the source if you want to go further into dynamic optimization with continuous stochastic processes (Brownian motion). A good, quite extensive but not very difficult introduction to stochastic dynamic programming can be found in Ross. This book is useful also for micro. A more rigorous treatment of dynamic optimization in continuous time can be found in Seierstad and Sydsæter. Gerald and Weatley is a book in applied numerical analysis in general and Cooley has some chapters on how to solve numerical real business cycle models.

Recommended for everyone

Recommended for interested

Course Outline

Introduction to Dynamic Optimization

Dynamic Optimization in Continuous time

Dynamic Optimization in Discrete time

Some Numerical Methods